Coal prospects boost outlook for Tauranga

By PAM GRAHAM

Port of Tauranga has been upgraded by ABN Amro even though major customer Carter Holt Harvey is cutting its harvest by 15 per cent.

ABN has downgraded its profit forecasts for the port but upgraded its recommendation on the stock to "buy" from "add" because new imports of coal will counter any reduction in log exports and because the port's shares are trading at a discount to ABN's valuation of $5.27. The shares closed on Friday at $4.18.

The port will exceed last year's total of log exports of 3.4 million tonnes this year, chief executive Jon Mayson said on Friday. He said he did not know yet by how much Carter Holt would reduce volume to the port.

Meanwhile, a heads of agreement for new coal imports by Genesis Power to Huntly was being discussed by both boards.

Up to 1 million tonnes of coal is expected.

ABN argues the coal business could continue as a mechanism for Genesis to ensure the New Zealand price of coal does not rise above international prices, while it doubts the resolve of forestry companies to move out of the commodity price-taker role by reducing supply.

Carter Holt, the nation's largest forest owner, said this month that it was reducing its harvest by 1 million tonnes a year. Port of Tauranga is the closest port to 76 per cent of the company's forests.

Central North Island Forest Partnership's manager Fletcher Challenge Forests and Weyerhaeuser said on Friday that they had no plans to cut their harvest.

Rob McLagan, of the New Zealand Forest Owners Association, said some forest owners were reducing their harvest but overall the picture was mixed.

Some accepted lower margins when markets were weak to maintain relationships with customers and others had distribution arrangements with foreign shareholders.

Last year was buoyant, but a 30 per cent fall in the benchmark wood mouldings price in the US combined this year with a rise in the kiwi and a fall in the Chilean peso reduced competitiveness of exports, said Russell Dale, of Timber Management, the new manager of the CNIFP estate.

ABN Amro said it expected the port to report a $28.3 million annual profit on August 27, up from $25.9 million last year. The market consensus is $29 million.